Electrolux AB is preparing for further price increases should raw material costs keep rising. The maker of Zanussi vacuum cleaners and AEG washing machines twice this year has raised list prices for products sold in the U.S. another price hike takes effect in January, and more could follow. Electrolux also has adjusted its pricing in Latin America, Europe and Australia.
“We are in the midst of negotiations right now” with suppliers, Chief Financial Officer Therese Friberg said in an interview with CFO Journal. “The volatility is high on the materials and on the currency side; the numbers are still moving around.”
The Stockholm-based company’s costs rose this year after the introduction of U.S. tariffs on foreign steel and on imports from China and currency fluctuations in Latin America. The company forecasts 3 billion-kronor (USD 331 million) hit to its earnings this year because of higher raw material costs, tariffs and currency gyrations, and expects a similar effect in 2019.
Prices for steel purchased in the U.S. have risen because of the Trump administration’s tariffs, Friberg said. U.S. levies on Chinese goods, including those on electronics and other components, further drove up costs at Electrolux’s U.S. manufacturing sites, Friberg said.
The company makes products in Anderson, S.C.; Kinston, N.C.; and Springfield and Memphis, Tenn. It will cease production in St. Cloud, Minn. North America represents about 35 percent of Electrolux’s sales.
“Electrolux is very sensitive to changes in raw materials prices as it buys a lot of steel and plastics,” said James Moore, a partner at Redburn Europe Ltd.
The company’s management is proactively trying to pass on higher raw material and tariff costs through price hikes, similar to what competitor Whirlpool Corp. is doing, Mr. Moore said.
Prices on Electrolux products sold in the U.S. have risen 10 percent this year, and will be followed by a 4 percent rise in January, according to Mr. Moore. Prices for products sold in Europe and in Australia will go up 3 to 4 percent in January, he said. In Brazil, Electrolux goods will become 8 percent more expensive in January, while in Chile, the price hike will amount to a 10 percent increase, he said.
The company’s CFO declined to provide specific figures for the price increases. — The Wall Street Journal